Netflix, Inc. (NFLX)’s Notable Headwinds: Coinstar, Inc. (CSTR), Time Warner Inc (TWX)

Also, Time Warner Inc (NYSE:TWX)’s HBO is increasingly offering ubiquitous access to its subscribers via its HBO Go offering. Time Warner Inc (NYSE:TWX)’s premium channel, HBO already has notched up 41 million premium domestic subscribers and has a lot more outside the U.S. as well. However, it comes at a much higher price-point, compared to the Netflix. If HBO Go is offered as a standalone service, it will be a bigger threat for Netflix due to the original content library of HBO.

5. Uncertain turnaround of international segment: Netflix, Inc. (NASDAQ:NFLX) is finally getting some traction in adding subscribers to its International operations. It now has more than 6.1 million unique subscribers across 40 countries, and the number of international streaming subscribers should grow faster than in the domestic market.

However, the contribution losses stemming from its international segment stood at roughly $390 million, primarily driven by international content costs and marketing expenses. As the international segment will likely add more new content to compete with Amazon’s European subsidiary, LOVEFiLM as well as regional competitors like Clarovideo, Sky NOW TV, HBO Nordics,Viaplay etc. The incremental content costs for Europe and Latin America might widen losses in the near-term, and it might take a while before the segment rolls out a contribution profit.

The bottom line

The increased number of Internet connected devices and widespread consumer adoption of online video viewing are the main growth drivers for the company, but headwinds remain. The increasing presence of many competitors can increase Netflix’s churn rate, i.e. the voluntary cancellations, which will profoundly impact the company. The long-term outlook used by Netflix’s management might result in short-term headwinds, but the long-term secular growth for the company holds true.

The article Netflix’s Notable Headwinds originally appeared on Fool.com and is written by Ishfaque Faruk.

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